Depository - Meaning and Functions
What is a Depository?
Depository is generally referred to a place or space where you can hold your asset with safety and security. E.g., Bank, bank is a depository who holds your assets and keep them safe. Similarly, in stock market, the shares which you purchase is held and maintained by depository in an electronic format in your demat account. Stock brokers provides the facility of demat accounts via Depository.
There are 2 depositories in India:
• NSDL
• CDSL
1. NSDL
NSDL stands for National Securities Depository Limited. It was established in the year 1996 and is one of the largest depositories in the world. The primary operating market for NDSL is National Stock Exchange (NSE).
2. CDSL
CDSL stand for Central Depository Services Limited. It was established in the year 1999 and is the first listed depository in India. The primary operating marking for CDSL is Bombay Stock Exchange. (BSE).
Both NSDL and CDSL are registered by the government of India and Stock Exchange Board of India (SEBI). Stock brokers offering demat services are generally registered with any of these depositories.
Functions of Depository
• Eliminating the need of physical certificates of shares as it allows investors to hold shares in dematerialized form.
• Lesser paperwork.
• Easy and smooth process of share transfer.
• Maintaining the complete record of shares owned by the demat account holders in electronic format.
• Making the trade settlement easier.
Also Read: Difference Between NSDL and CDSL
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